Realty411 Magazine The Future of Real Estate is Here | Page 80
10
Rules of Successful
Real Estate Investing
market, and times when it
does not.
Only invest in markets when
it makes sense to do so, not
because you live there or you
bought property there before.
There’s an element of timing
and you don’t want to buck
the trend.
By Marco Santerrelli, CEO of Norada
Real Estate Investments
I came up with the following rules of
successful real estate investing over my
many years of successes and failures.
These are the same rules I follow today
and share with our clients at Norada Real
Estate Investments.
6. Take a Top-Down
Approach Always start by
selecting the best markets that
align with your investment
goals. Most investors start
by analyzing properties
with little to no regard of its
location. This can be a big
mistake if you don’t consider
the investment in light of the
market and neighborhood
it’s in. The best approach is
to first choose your city or
town based on the health of
its housing market and local
economy (unemployment, job
growth, population growth, etc.). From
there you would narrow things down
to the best neighborhoods (amenities,
schools, crime, renter demand, etc.).
Finally, you would look for the best
deals within those neighborhoods.
1. Educate Yourself
Knowledge is the new currency. Without
it you are doomed to follow other
people’s advice without knowing if it’s
good or bad. Knowledge will also help
take you from being a “good” investor
to becoming a great investor, and that
knowledge will help provide a passive
stream of income for you or your family.
2. Set Investment Goals
A goal is different from a wish; you may
wish to be rich, but that doesn’t mean
you’ve ever taken steps to make your
wish come true. and it’s usually 6 to 9 months after the
fact when you find out. Don’t chase after
appreciation. Only invest in prudent value
plays where the numbers make sense from
the beginning.
Setting clear and specific investment
goals becomes your road map and
action plan to becoming financially
independent. You are statistically
far more likely to achieve financial
independence by writing down specific
and detailed goals than not doing
anything at all. Your goals can include
the number of properties you need to
acquire each year, the annual cash-flow
they generate, the type of property, and
the location of each. You may also want
to set parameters on the rates of return
required. 4. Invest for Cash-Flow
With few rare exceptions, always buy
investment property with a positive cash-
flow. The higher, the better. Your cash-
on-cash return is directly related to the
before-tax cash-flow from your property.
Cash-flow is the “glue” that keeps your
investment together. Your equity will
grow over time (through appreciation and
loan amortization), while the cash-flow
covers the operating expenses and debt
service on your property.
3. Never Speculate Always invest
with a long-term perspective in mind.
Never speculate on quick short-term
gains in appreciation, even in a heated
market experiencing double-digit gains.
You never know when a market will peak
Realty411Guide.com
7. Diversify Across Markets
Focus on one market at a time,
accumulating from 3 to 5 income
properties per market. Once you’ve
added those 3 to 5 properties to
your portfolio, you would diversify
into another prudent market that is
geographically different than the
previous one. Typically that means
focusing on another state.
One of the underlying reasons for
diversification within the same asset
class (real estate), is to have your
assets spread across different economic
centers. Every real estate market is
“local” and each housing market
moves independently from one another.
5. Be Market Agnostic The
United States is a very large country
made up of hundreds of local real estate
markets. Each market moves up and
down independently of one another due to
many local factors. As such, you should
recognize that there are times when it
makes sense to invest in a particular
PAGE 80 • 2014
Continued on pg. 91
reWEALTHmag.com